Four men, including brothers from Langley and Surrey, have been found liable for organizing multi-million dollar pump-and-dump stock fraud schemes by the B.C. Securities Commission (BCSC).
The original accusations against all the participants alleged they had made proceeds of about $46 million from artificially inflating share prices in three B.C. companies around 2017 and 2018, but the BCSC panel ultimately ruled that only some of the accusations could be proven.
In a 134-page ruling issued on Jan. 19, the commission found Kamaldeep Thindal, of Langley, and Amaldeep Thindal, of Surrey, along with Yazan Al Homsi and Aarun Kumar, were all liable for violating securities laws, with Kamaldeep the “central figure.”
Two others, Pardeep Luddu and Mani Chopra, saw allegations against them dismissed as unproven by the commission.
The allegations by the BCSC were that the Thindals and their associates organized a series of pump-and-dump schemes. A pump-and-dump involves taking control of a small, low-value company, or buying up a large amount of stock in the firm.
The conspirators then “pump” the stock price by aggressively promoting it, often making wild or inflated claims that it will soon shoot up in value.
Investors fooled by these claims buy the stock, which temporarily drives up its price.
The conspirators then “dump” their holdings of the stock while the price is still high. The investors then find the company is largely worthless, and the value of their stock plunges again.
The original allegations centred around three companies – Reliq, a health-care technology company; Block One Capital, involved in finance and bitcoin mining; and Integrated Cannabis Company, which originally started as a mining firm.
The commission found that allegations around Reliq stock couldn’t be proven, but the other two were found to have involved false or misleading stock promotions, to cause an “artificial price,” which is the key of a pump-and-dump scheme.
Both of the schemes took place in 2017 and 2018.
Early in 2017, a dozen investors bought up 8.4 million shares in a mining firm called CNRP – eight of those investors listed their addresses as the Core Capital office address in Vancouver.
There were then a number of transactions involved other companies, including XSPRAYS, a U.S.-incorporated firm that was in the business of making “neutraceuticals” for a variety of ailments.
Through the summer and fall of 2018, Integrated made a major promotional push about its upcoming acquisition of a company that they claimed owned rights to distribute some XSPRAYS products, including cannabis and CBD products.
According to the BCSC ruling, investors would have been led to believe that Integrated Cannabiswas working to acquire a company that had “what appeared to be exciting and valuable exclusive international rights,” which “was false,” the ruling said.
Investor campaigns were “ramped up” around the same time as the company was putting out misleading press releases, the BCSC found.
Meanwhile, the people who had set up the Integrated deal were selling stock as it rose in price.
“The Respondents conducted a significant and sustained campaign calculated to increase share prices, and the nature of the communications included in the campaign are clear enough to justify our conclusion that an artificial price was created as a result,” the ruling said.
It compared Kamaldeep Thindal’s role to that of a quarterback.
“Thindal led virtually every step in this multi-year, multi-party series of campaigns which, as we have concluded, involved the use of false and misleading information to create an artificial price for the shares of Integrated,” the ruling reads.
Virtually every key step involved Core Capital representatives, using Core Capital email addresses.
Kamaldeep Thindal organized the various companies involved, set up agreements between them, and helped draft misleading press releases and paid for promotional campaigns.
“Based on his conduct, there is no space for a conclusion that K. Thindal was not acting with the full knowledge and intention to spread false information, to create an artificial price for the shares of Integrated, and to profit as a result,” the ruling said.
Meanwhile, people involved in the scheme were also pulling in large amounts of money from selling the shares at inflated prices. Amaldeep Thindal sold Integrated stock for $3.4 million in proceeds, while Al Homsi sold his for $2.8 million.
Block One was a similar story. By the spring of 2017, about 40 per cent of the company’s stock was owned by the accused, their relatives, or companies they controlled or were involved with as directors.
The company announced it was moving into “the blockchain sector,” and issued several millions shares over the next few weeks, at values of between 10 and 25 cents a share, to the accused and some of their relatives.
Share prices, which had started at 24 cents a share in open trading, spiked up as high as $1.60 in late 2017, then slowly dropped back to below 60 cents a share in the spring of 2018.
All this activity came as Block One put out press releases claiming it had bought a cryptocurrency mining company, and alleging this would generate annual revenue of $7.8 million in US currency when fully operational.
In fact, it was Core Capital members who already owned the crypto mining company – they had incorporated it just two weeks before the announcement of the deal.
Meanwhile, Al Homsi was tweeting and re-tweeting about Block One frequently, referring to the company as an “absolute monster” and saying the stock was “on fire.”
However, it is unclear if many bitcoin mining machines were ever actually activated and running. The entire operation was sold to an American company in the spring of 2018.
The BCSC panel found that the company’s price had been artificially driven up, and that Core Capital was again “the umbrella organization through which virtually all conduct was conducted,” and that Kamaldeep Thindal was again “the directing mind for key events.”
The commission did not rule on how much money was unlawfully made from the Block One and Integrated schemes, but mentioned in parts of the ruling that various Core Capital members received six- or seven-figure proceeds as they sold off their stocks.
In the end, Core Capital, both Thindal brothers, and Al Homsi were found to have breached the securities act related to Integrated Cannabis, while Core Capital, the Thindals, Al Homsi, and Kumar were found to have breached the act related to Block One.
The commission has not yet ruled on financial penalties in the case, which has been left to a future phase of proceedings to take place between February and April.